2017 retirement plan contribution limits

Elective Contributions to IRAs, 401(k)s and Other Qualified Plans

On October 27, 2016, the IRS announced the new 2017 limits for IRA, pension and other contributions. For the most part, the limits remain unchanged from 2016 because there was not a sufficient rise in the cost-of-living index, which is needed to trigger an increase.

The maximum limit for contributions to IRA’s remains unchanged at $5,500 for 2017.

If you are age 50 or older, you can contribute a maximum of $6,500 to an IRA for 2017, unchanged from 2016. You can make contributions to your IRA for tax year 2016 up until April 15, 2017.

The catch-up contribution limit to 401(k), 403(b) and 457(b) plans, for those age 50 and over, remains unchanged at $6,000, for a total maximum contribution of $24,000 for 2017.

Traditional IRA

Contribution

Traditional IRA contribution amounts, for participants in employer plans, remain unchanged for 2017 and are phased out for 2017 as follows:

For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is, the deduction is phased out if the couple’s joint income is between $186,000 to $196,000, up from $184,000 to $194,000 for 2016.

The AGI phaseout range for taxpayers making Roth IRA contributions is similarly increased: $186,000 to $196,000 for married couples filing jointly, up from $184,000 to $194,000 for 2016. For single filers and heads of household, the income phaseout range is between $118,000 and $133,000, up from $117,000 to $132,000 for 2016.

Deduction

The deduction for taxpayers making contributions to a traditional IRA is phased out for 2017 as follows:

For singles and heads of household, covered by a workplace retirement plan, the income phaseout range increases to between $62,000 and $72,000.

For married couples filing jointly, in which the spouse making the IRA contribution is covered by a workplace retirement plan, the income phaseout range increases to between $99,000 and $119,000.

For a married individual filing separately, who is covered by a workplace retirement plan, the phaseout range is not subject to an annual cost-of-living adjustment and remains at between $0 to $10,000.

There are no income limits for converting a traditional IRA into a Roth IRA account. However, there may be income tax consequences depending on your income tax bracket and other factors.

Benefit Plan Contribution

Benefit Plan Contribution Limits: If you participate in a company plan, many of the limits for 2017 increase from 2016 as follows:

The maximum amount that an individual can contribute to a defined contribution plan for 2017, through both employer and employee contributions, is the lesser of (i) 25% of the employee’s total compensation, or (ii) $54,000. The annual benefit limit that can be funded in a defined benefit pension plan increases to $215,000 for 2017.

For participants in a Simplified Employee Pension (SEP) plan, the minimum compensation threshold for 2017 remains at $600.

The contribution limitation for SIMPLE retirement accounts remains unchanged at $12,500 for 2017.

The maximum annual compensation that can be taken into account in 2017, for retirement plan purposes, increases to $270,000.

The compensation threshold for determining a highly compensated employee (HCE) remains at $120,000 for 2017.

The limit used in the definition of a “key” employee in a “top-heavy” plan increases to $175,000 for 2017.

The maximum deferral for participants in the Federal government’s Thrift Savings Plans and Tax Sheltered Annuities remains at $18,000 for 2017.

Social Security Wages and Self-Employment Income

This wage base applies only to the 6.2% “Old Age and Survivors Disability Insurance” (OASDI) portion of FICA payroll taxes. The employer also contributes an additional matching 6.2%.

The additional 1.45% Medicare (“HI” or “health insurance”) portion of FICA payroll taxes is not capped at the first $127,200 of wages, but instead is applied to all wages paid to an employee. The employer also contributes an additional matching 1.45%.

Self-employed persons pay a total of 15.3% of self-employment earnings, comprised of 12.4% for OASDI (up to the wage base limit) and 2.9% for Medicare health insurance (no earnings limit).

High earners (singles and heads of household with wages above $200,000 and married couples filing jointly with wages above $250,000) will pay an additional 0.9% Medicare tax on their wages in excess of these thresholds.

Self-employed persons are also subject to this additional 0.9% Medicare tax on their earned income in excess of the thresholds. If an individual or married couple have both wages and self-employment income, the 0.9% tax is imposed on the combined income in excess of the limits.

Social Security benefits and “Supplemental Security Income (SSI)” benefits will increase slightly in 2017, as they are tied into increases in the Consumer Price Index. There was a 0.3% increase in the CPI from the third quarter of 2015 to the third quarter of 2016. This resulted in just a small increase in benefits.

The Medicare Part B premiums, which are typically deducted from social security benefits, will increase to $134.00 per month in 2017, up from $121.80 in 2016. However, since there was just a 0.3% CPI increase in Social Security or SSI benefits for 2017, those people already receiving benefits will have a very slight increase in Medicare Part B premiums.

Also, if your modified adjusted gross income, as reported on your 2015 tax return, exceeds certain thresholds, the 2017 Medicare Part B premium can increase to between $187.50 and $428.60 per month, instead of the $134.00/$105.20 for the lowest Medicare adjusted gross income brackets (joint-$170,000; single-$85,000).

For 2017, the annual Medicare Part B deductible will increase to $183.00, up from $166.00 for 2016.